Changing Turkey, changing power status in international league

Sitting in a street café in Sultanahmet, the heart of historic Istanbul, it is possible to sense the vibrations of business dynamism in this bustling city — an energy that can now be felt all over modern Turkey.

For today Turkey no longer sees itself as a bridge between Asia and the West, but as a dynamic regional hub that derives its strength from its $750-billion-strong economy and has the authority to rewrite the rules of the power game in the Middle East, Eurasia and Southeast Europe.

This change in perspective is seen most clearly from the fact that political, business and financial leaders no longer look towards Old Europe but instead to the East in the direction of the dynamic Asia-Pacific nations, particularly China and India, as well as the Middle East, the Gulf and Eurasia.

This means that the European Union is no longer a national obsession. For many years successive governments sought full membership, only to be offered second-class status (dressed up as a “privileged partnership”) by Germany and France who looked at Turkey with a mixture of fear and anxiety.

Today most Turks seem to have lost enthusiasm for EU accession, and business and financial leaders today — not to mention the wider electorate — tend to look down upon the trouble-stricken eurozone countries.

There is too a deep-seated resentment of the way the EU has kept Turkey in the waiting room while letting in all latecomers from Eastern Europe and the Mediterranean one-by-one.

As a result there is more than a suspicion that if Turkey had to vote today on immediate EU accession there would be a majority against. A poll last December suggested a narrow lead of 51-41.3 percent in favor of membership. And that figure can only fall as the EU’s economic problems deepen.

Indeed there is now a growing belief that Turkey has actually benefited from being kept outside. I often joke to my French and German friends that Turks are grateful for the campaign waged over the years to block their membership application.

This snub has incentivized the Turks to rediscover themselves and look to the parts of the world they turned their backs on since the republic was founded in 1923 out of the ashes of the Ottoman Empire.

And as these new relationships are established, there is a growing feeling among the country’s elite that it is the EU rather than Turkey that is the real loser from the failure to agree to membership terms.

The chance the EU is losing

The EU is losing the chance to welcome a secular, modern, entrepreneurial state with a majority Muslim population into the family of European nations. And, without Turkey’s economic, military and cultural authority, the EU cannot become a real global power.

As Brussels tries to resolve the eurozone debt crisis, the EU needs Turkey to boost its weak economic growth. In stark contrast to the West, Turkey has become stronger. It has one of the fastest growth rates in the world — almost 10 percent last year — and has the realistic ambition of becoming one of the world’s top 10 economies by 2023.

Turkey has one of the most efficient financial systems, which helped it cope with the global banking crisis. The banks invested less in risky financial instruments and so became a safe haven for global capital.

And it has acquired new trade partners. Before the 2008 global crisis, 56 per cent of its exports went to the EU, a figure that has now shrunk to 47 percent. This is due not to a fall in volume of exports to the EU but a rapid rise in sales to regions like the Middle East and North Africa.

These factors have enabled Turkey’s political leaders to exude confidence that it can avoid the fallout from the eurozone crisis.

There is more caution from business and financial leaders. They realize that the economy, closely linked to the EU via the 1995 customs union, will feel the effects of a eurozone recession — the OECD has already warned that growth in Turkey this year will slow to 3.0 per cent.

This decline in Europe makes it even more important that Turkey can build strong commercial relationships with its regional neighbors, something that can only be achieved with regional political stability.

The Arab Spring however has made it more complicated for Turkey to achieve its signature foreign policy of “zero problem with neighbors.”

In Syria, the West will not take the lead in forcing President Bashar al-Assad to make political reforms. And, though seemingly best placed to make an impact in Syria, Turkey will not act on its own because it fears unilateral moves or a botched operation would threaten its image as a soft power.

Iraq also figures prominently among Turkey’s international agenda. Most want a federal Iraq to emerge from the current chaos with significant power devolved to the regions.

Leaving Kurdish region of Iraq in control of its resources

Critically, this would leave the Kurdish region of Iraq in control of its oil and gas resources though it is prepared to share revenue with Bagdad.

The Kurdish region’s prosperity has provided impressive opportunities for Turkish investment. Contractors are building much of the transport infrastructure, shopping malls are filled with Turkish retail outlets, the two new five-star hotels are both Turkish, and all the major Turkish banks have a significant presence.

Reconstruction work in the Arab Spring economies is also proving lucrative for Turkish companies. The government has signed agreements with Egypt to cooperate on areas ranging from technology to energy and pledged to raise trade from the existing level of $3.7 billion to $10 billion.

A major boost could also come with the restoration of $18.5 billion worth of contracts in Libya, which Turkish companies were involved in but were suspended at the start of the civil war.

The Middle East and North Africa is also becoming a key export market accounting for more than a quarter of Turkey’s exports, up from 17 percent five years ago.

For all its success in the region, one of the main challenges for Turkey is — as it has always been — is to maintain secure supplies of energy. But, as it builds its position as a regional energy hub, it is also now offering lucrative opportunities.

Its energy interests now stretch from China’s northwestern province of Xinjiang Uyghur Autonomous Region and to the North African tip of the Mediterranean, as well as from the Straits of Hormuz, all the way to the Arctic.

The priority is to secure uninterrupted supplies at affordable prices. But, beyond that, there is a determination not to be just a bridge over which energy flows.

Turkey is determined to become a regional hub, extracting greater value for the oil, gas and power that pass through its borders in pipelines or cables, and turn this role to economic, foreign and security policy gains.

It appears to be a strong position, but Ankara has to strike a delicate balance. Any attempt to use this transit role for political leverage on the EU or the energy producers could backfire. Overplaying Ankara’s hand could, moreover, cast doubt on Turkey’s reliability as a transit country for other products. In addition, Turkey depends heavily on energy imports to power the industries that deliver economic growth.

However, the fact that Turkey sees being an economic hub as a strength that it can exploit is further evidence of its new found political and economic confidence and also of its readiness to look to the long term.

Politicians, business leaders and financiers today are focusing on competitiveness, sustainability and the environment as they look to plan a society for future generations.

There is perhaps for the first time in several generations a credible belief that with the right policies, institutions and leadership, Turkey could well sit on the management board of the new world order by 2023, the centenary of its founding.